Bulletin n. 1/2006 | ||
May 2006 | ||
Heinemann Friedrich, Ullrich Katrin |
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The Impact of EMU on Inflation Expectations | ||
in Open Economies Review , Volume 17, Number 2 , 2006 , 175-195 | ||
This paper analyses the impact of the monetary regime change from the Bundesbank to the ECB on inflation expectations. In the theoretical part, the Barro-Gordon model is used to derive the potential effect of a new central bank on inflation and inflation expectations. The econometric investigation is based on a flexible specification of expectation formation which allows both for rational and adaptive elements. The results indicate that the monetary regime change did not have a strong and lasting impact on the formation of inflation expectations and that the credibility of both central banks is not perceived to differ significantly anymore. | ||